Tokenization to Improve Access to Financial Services in Latin America

People in Latin America who lack access to the banking system may gain access to financial services through asset tokenization.

Tokenization of real-world assets (RWA) has the potential to transform Latin America’s financial system, increasing its efficiency, inclusivity, and transparency while positively impacting the region’s economy. This is highlighted in a report by Mastercard and Ava Labs.

The report outlines three key benefits of tokenization, namely:

• increased speed of transaction processing and settlements;
• reduced risks associated with siloed systems and manual processes;
• simplified implementation of fractional ownership.

Experts believe blockchain-based asset tokenization enhances operational efficiency, improves data management and interoperability, reduces operating costs, and opens new business avenues in the financial sector.

The report also highlights significant socio-economic benefits for Latin America, such as rebuilding trust and transparency historically hampered by systemic inefficiencies. Additionally, tokenization lowers barriers to capital markets, particularly for the unbanked population.

A practical example of tokenization is the transfer of ownership rights to non-monetary assets, such as real estate. This enables individuals without traditional banking access to directly participate in the real estate market.

The report notes that Brazil, Argentina, and Mexico rank among the top 20 countries for cryptocurrency adoption.

According to Mastercard, approximately 43% of all remittances in Latin America in 2023 were conducted using cryptocurrencies, while about 21% of the region’s population lacked access to banking services.